Ronin of the Spirit

Because reality is beautiful.

The Health Care debate.

Health care as I see it.

I started this blog just writing down as many facts as I could about the health care system, trying to make sense of it all. The first assumption is that health insurance is the right way to pay for health care, and this leads to two problems. One, that insurance is too expensive, and two since it’s so expensive, to few people have it.

Well, I’ll begin by saying there could be serious improvement to health insurance. First off, insurance is a method of sharing risk. Everybody pays a foreseeable and affordable loss (premium) to the company, who in exchange pays unforeseeable and un-affordable loss affecting a small minority of policy holders.

I’m not sure insurance is a totally appropriate method of paying for health care in this day and age for three reasons. One, modern diagnostics, predictive methods, and techniques mean the unfordable loss is no longer unforeseeable. Two, the big three killers: hypertension, smoking, and high cholesterol, are all preventable and highly dependent upon lifestyle choices. Again, this does not meet the criterion “unforeseeable”. In fact, we could even say high treatment costs for chronic illness are so foreseeable as to be statistically unavoidable. Three, the rate of premium depends upon how expensive the policy holders un-affordable loss is to the company, and the number of policy holders who need it. In an age of 32% obesity rates (obesity exacerbates almost every chronic health condition.) that are likely to be approaching 40% in the next ten years, health care expenses don’t meet the final criterion of only a small minority experiencing an un-affordable loss.

Is insurance too expensive? Probably. Everything I mentioned above can only go one place: premium increases. Are insurance companies pushing the boundaries of ethical behavior? Probably. Is that failure of the insurance companies? Well, not exactly. People and groups have the ethics they can afford. The average health care insurance company runs a 5.5% profit margin. In a free market economy you get what you pay for. The higher the premium the better the service. The lower the premium the worse the service.

The answer to improving the insurance industry is pretty simple. Consumers need better info, with less dead weight losses to changing companies. The insurance companies need to write their contracts at a 6th grade level (Average US reading comprehension), and switching insurance providers needs to be a single sheet of paper or a phone call. However, other then codes requiring simplicity, transparency, and interchangeable standards, the industry needs to be heavily deregulated. This encourages the sort of cut-throat capitalism that makes America a land of opportunity. Also, medical saving accounts are an option. Between private capital in medical savings accounts, credit union style insurance companies, and D-regged private insurers, competition would make companies leaner.

But ultimately, we are talking about companies fighting for tenths of a percent. The cost of premiums is decided by the frequency and cost of care. Insurance companies can profitably only reduce unnecessary visits. Visits which prevent costly claims increase profitability, so a huge reduction is frequency of care is unlikely. The real cost of health care rests not on insurance companies, but upon care providers.

This case is further born out by the fact that about 1/3 of the cost of health care in the US is paid for by the Medicaid, Medicare, SCHP, and VA government plans. If the problem of cost was one of insurance alone, one would expect that there would be a significant saving to socialized health care, but analysis of the cost of gov-care versus private care show no significant reduction in price for identical procedures. The additional 5% private insurers make as profit disappears into the significantly more expert administration of the private insurers, so gov-care is not 5% cheaper.

So insurance is just a middleman, the real cost in the health care providers. Why is American medicine so expense? Supply and demand says, consumers demand will use up the supply, raising costs until producers can create more. The producers will make so much it will lower the price. The tension of supply and demand drives the price down to market equilibrium, where the consumer is paying as little as he can, and the producer is charging as much as he can. That’s the miracle of free market economy. It pushes the price to where it the lowest possible, ensuring the greatest number have access to the good. Yet in the US 100 million people are on some kind of gov-care. That’s a third of the population!

Every body needs health care, the demand is universal, so it should be decreasing supply, increasing the price, raising the incentive to enter the field which would result in increased competition. This competition would result in innovations which would increase the supply and lower the cost. For some reason, this isn’t happening. In fact, the American medical system is running so badly, that planned economies are achieving greater results with less spending, both in raw dollars and as portion of GDP. The US spends more on gov-care (Medicaid, Medicare, SCHP, VAB, etc.) than countries with fully socialized health care spend on it, to get lower rates of health for a 1/3 the per capital population. Then the 60% of Americans pay again! American private health care costs more then any other industrialized nation. France in particular stands out (!) with the average American paying over 200% more for private health care, and 75% more for gov-care, while having maintaining statistically worse health.

When planned economies are running better then capitalism, we know something is rotten in Denmark.  I’ll address what later.

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August 23, 2009 - Posted by | Government, Pharmacology, Self discovery, skepticism, Uncategorized | , , , , , , , ,

5 Comments »

  1. Dang… I’ve been wanting to research and blog on this for the last few weeks and haven’t found the time!

    Interesting post. Maybe I’m tired, but I’m not sure I quite got your view point on the matter…

    I’ve still got a lot to research, but my initial reservations about socialized health care is just that… that it’s socialized. I guess the big thing that pops into my head too is that if we get rid of all these big insurance companies and replace it with huge Big Brother insurance, what is that going to mean for our economy with hundreds of thousands of people who work for health insurance companies no longer have jobs?

    I think there are a LOT of details on this health care reform bit and I really hope no drastic or hasty measures are taken before this is thoroughly thought out, researched, and planned.

    Comment by Sui Generis | August 24, 2009 | Reply

  2. My point? Well, originally my point was going to be how evil and vindictive the insurance companies are, but upon research, they don’t really seem to be evil. I’ll tell you the cliff hanger of WHY the hospitals are charging to much in my next blog.

    Comment by truthwalker | August 24, 2009 | Reply

  3. Okay, well I look forward to seeing the next blog. I work in health care… so I’m very interested to see what you have to say!

    First of all… I got the email notification of your original reply to my comment, before you edited it to what it is now, and it made me laugh! But, I do think that were big insurance companies to stay around that there needs to be some sort of regulation or something. I think the way the system works really doesn’t benefit the insured, at least not in most cases.

    Comment by Sui Generis | August 24, 2009 | Reply

  4. I’m not feeling well enough to read your entire series tonight, but I did make it through this post. As always, I find your perspective interesting. I would only ask where these numbers, statistics, etc. are coming from. You know me… 😉

    Good to see you again, by the way.

    Comment by Lottie | September 29, 2009 | Reply

    • Yeah, my sources were mostly government and business groups. I don’t bother posting sources because they are hard to write correctly and well at the same time and most readers don’t give a damn. 🙂

      Comment by truthwalker | September 30, 2009 | Reply


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